Scott A. Anderson told a Wells Fargo breakfast group in Irvine that he expects local employment to decline 0.2% this year — not good but better than the -7.4% in 2009.

Next year, however, he predicts hiring in Orange County will grow at a 1.6% pace, outperforming the state, which will see 1.1% job growth.

"The big drag in Orange County going forward is the state and local budget problems — you're seeing some pretty big job losses," he said.

Nationwide, Anderson said the recovery has slowed considerably. He expects second quarter gross domestic product growth to be revised downward on Friday to 1.2% to 1.5% from the previous 2.4%.

That's a major pullback from the first quarter when the Bureau of Economic Analysis said GDP grew at 3.7% pace.

"We're in a quicksand recovery," said Anderson, noting the economy can't seem to gain traction in jobs or other economic growth. "We keep getting pulled into this morass."

He said the one thing he is watching now is whether people are simply pausing in the recovery or whether they are starting to revise their business plans. He placed the odds of a double dip recession at the national level at 25%.

The major problem is that the economy remains weighed down by the housing bubble, Anderson said. With foreclosures this year likely to approach 2009's high levels, he expects home prices to drop another 6% over the next 12 months.

"Orange County won't be able to avoid lower home prices," he said, with a 6% drop likely here, too.

That means Orange County would give back most or all of the price gains homeowners have seen this year. Recent real estate surveys say local home prices were up 3% to 6% in July over July 2009. (Read more on Orange County home prices on Lansner on Real Estate.)

Anderson noted that in the first half of the year, Orange County's economy was showing some strength, with a net gain of 29,000 jobs through June. July's loss of 10,300 jobs may have been an anomaly due to the layoff of temporary census workers, he said.

"Even with the monthly job loss in July, Orange County's employment performance year-on-year improved to a positive 0.5%, while U.S. employment was unchanged from a year ago," Anderson said. (Click on chart to enlarge.)

Orange County has benefited from growth in leisure and hospitality jobs as Americans vacation closer to home.

"That's a big driver for the economy in this community," Anderson said.

Still the county has a deep hole to dig out of. He noted employment here dropped 10% from peak to trough during the recession, twice the national rate. Local employment in financial services and manufacturing both fell 25% and jobs in construction dropped 40%.

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